You would think that in a in the most severe economic downturn prices would generally hold steady or rise very slowly. Well, as we know, when you have a captive market that ain’t necessarily so.
Take the case of Monsanto last year. Monsanto controls much of the market for the seeds which US farmers need to grow their crops and through through a series of monopolistic and anti-competitive practices actually managed to raise the prices farmers had to pay for the single most important item US agriculture needs to produce the food they grow for your table by double digits in a year when the inflation rate was often negative and never exceeded 2.7% in any single month. That’s quite a feat, don’t you think?
During the depths of the economic crisis last year, the prices for many goods held steady or even dropped. But on American farms, the picture was far different, as farmers watched the price they paid for seeds skyrocket. Corn seed prices rose 32 percent; soybean seeds were up 24 percent. […]
Such price increases for seeds — the most important purchase a farmer makes each year — are part of an unprecedented climb that began more than a decade ago, stemming from the advent of genetically engineered crops and the rapid concentration in the seed industry that accompanied it.
Monsanto is one of the largest multinational companies in the world, and controls the largest share of the seed market in the United States. And now critics are contending that it has used its market share and anti-competitive business practices to crowd out competition and gouge US farmers. Thankfully, this is one are where the Obama administration deserves some credit for recognizing the problem and taking action.
… The Justice Department began an antitrust investigation of the seed industry last year, with an apparent focus on Monsanto, which controls much of the market for the expensive bioengineered traits that make crops resistant to insect pests and herbicides.
The investigation is just one facet of a push by the Obama administration to take a closer look at competition — or the lack thereof — in agriculture, from the dairy industry to livestock to commodity crops, like corn and soybeans.
[…]
The Iowa attorney general, Tom Miller, has also been scrutinizing Monsanto’s market dominance. The company’s genetically engineered traits are in the vast majority of corn and soybeans grown in the United States, Mr. Miller said. “That gives them considerable power, and questions arise about how that power is used,” he said.
Critics charge that Monsanto has used license agreements with smaller seed companies to gain an unfair advantage over competitors and to block cheaper generic versions of its seeds from eventually entering the market. DuPont, a rival company, also claims Monsanto has unfairly barred it from combining biotech traits in a way that would benefit farmers.
Of course, Monsanto is not taking these charges lying down. The company is officially claiming that its double digit price hikes are perfectly legal, and any antitrust violations are trumped by US patent law.
You know patent law, right? The one area of of US law which gives companies a monopoly on the products they produce if they can claim an innovation. And that is precisely what Monsanto is going to use to claim that the genetically engineered crops US farmers grow in which its patented genes are a vital part of the genome give it the right to screw US farmers.
The Department of Justice and seven state attorneys general are investigating whether the world’s largest seed company is using gene licenses to keep competing technologies off the market. At issue is how the St. Louis-based company sells and licenses its patented trait that allows farmers to kill weeds with Roundup herbicide while leaving crops unharmed. The company’s Roundup Ready gene was in 93 percent of U.S. soybeans last year.
“Justice is clearly trying every way it can to see whether Monsanto is exceeding its rights under the patent,” said James Weiss, a Washington-based attorney at K&L Gates LLP who helped defend Microsoft Corp. against a federal antitrust probe. “At the end of the day, they may not be able to do much with it because of the scope of those patents. In almost all the cases, the courts come out on the side of intellectual property.”
Yet Monsanto’s seeds are so ubiquitous that they have become like AT&T’s telephone lines before the company’s 1984 breakup or Microsoft Corp.’s Windows operating system in the 1990s, said James P. Denvir, an attorney who represents rival seedmaker DuPont Co. and led the government’s AT&T case.
“Both cases involve what I think of as a classic platform monopoly,” Denvir said. “It’s a facility that competitors need access to, to compete against the monopolist.” […]
While patents provide some protection from antitrust claims, giving a company a legal monopoly for a specified time, patent rights can be abused, DuPont lawyers and others said.
“The question becomes whether or not somebody in that position has engaged in some bad acts that either got it in that position or are designed to maintain that position or to extend that position to other markets,” said Charles “Rick” Rule, a lawyer at Cadwalader Wickersham & Taft LLP who ran the Justice Department’s antitrust unit under President Ronald Reagan.
Wow, that’s impressive. Ninety-three perccent of all US soybeans contain a gene that Monsanto patented. Oh, and 80% of all corn seeds, too.That’s bigger than Microsoft’s market share for operating software. No wonder Monsanto can generate profits at a time when multiple businesses are struggling to survive.
Monsanto has been extremely aggressive in making its patent claims for “new genes” and other biotech advances on seeds and animals. For example, Monsanto has attempted to acquire patents on pig breeding methods which were already in use!
In one application (WO 2005/015989 to be precise) Monsanto is describing very general methods of crossbreeding and selection, using artificial insemination and other breeding methods which are already in use. The main “invention” is nothing more than a particular combination of these elements designed to speed up the breeding cycle for selected traits, in order to make the animals more commercially profitable. […]
Monsanto holds extremely broad patents on seeds, most, but not all of them, related to Genetically Modified Organisms (GMOs). Monsanto has also claimed patent rights on such non-Monsanto inventions as traditionally bred wheat from India and soy plants from China. Many of these patents apply not only to the use of seeds but all uses of the plants and harvest that result.
Monsanto has also sought to enlarge its market share through mergers and acquisitions of other agribusiness firms. Not surprisingly the Antitrust division of the Bush administration’s Department of Justice turned a blind eye to Monsanto’s efforts to acquire other seed companies in order to consolidate its stranglehold on the US and world market for seedssuch as this 2005 acquisition:.
The news of Monsanto’s agreement to purchase Seminis has received little attention from the media other than the financial pages and a few seed industry and anti-globalization web sites. But then again, why should it? How many consumers – of food or seed – have even heard of Seminis? And yet, as Seminis spinmeister Gary Koppenjan said, “If you’ve had a salad, you’ve had a Seminis product.”
It is estimated that Seminis controls 40 percent of the U.S. vegetable seed market and 20 percent of the world market—supplying the genetics for 55 percent of the lettuce on U.S. supermarket shelves, 75 percent of the tomatoes, and 85 percent of the peppers, with strong holdings in beans, cucumbers, squash, melons, broccoli, cabbage, spinach and peas. The company’s biggest revenue source comes from tomato and peppers seeds, followed by cucumbers and beans.
Such aquisitions by Monsanto combined with its “we’ll claim patents on anything the can be grown” legal strategy is all part of Monsanto’s business plan to monopolize the market for — well, for the food you eat.
At almost every level of food production, Monsanto is seeking a monopoly position.
The company once earned its money almost exclusively through agrochemicals. But in the last ten years they’ve spent about US$ 10 billion buying up seed producers and companies in other sectors of the agricultural business.
Something tells me this was not what “free trade” enthusiasts and economic libertarians envisioned when they heralded the era of globalization. Then again, maybe it was. Maybe many of them were hypocrites who hyped the “invisible hand” of the marketplace when they knew that in fact in an unregulated environment the most ruthless and law breaking companies would ultimately come out on top in a world where regulation of their activities by the world’s governments was emasculated.
It’s not like history hasn’t shown us the effect of allowing monopolies to thrive in an unregulated marketplace before. From the beginnings of the Industrial Age through the Great Depression increasing consolidation in industry led to ever increasing inequality in wealth, and to huge monopolies which dominated the our economy, from JP Morgan on Wall Street, to US Steel to Standard Oil. It was a poeriod of uprecedented booms and busts, in which speculative bubbles would be followed by financial panics and depressions. It only ended after the reforms of the New Deal were put in place and enforcement of antitrust laws was actually taken seriously.
However, ever since the rise of Republican dominated governments starting with Ronald Reagan, ably aided and abetted by their fellow mega-business loving travelers in the conservative Democratic Leadership Council (of which the “Blue Dog” Caucus in Congress is only the current manifestation) we have witnessed consumer protections, industry regulation and enforcement of antitrust laws erode to such an extent that we are re-living the Gilded Age (although on steroids)in which monopolies and oligopolies controlled governments for their own financial gain and profit.
In short we are re-living a part of our past history in which large corporations ruled the world. Is it any surprise that as a result we are also experiencing the same economic upheavals and the he same destructive effects on the lives and financial security of ordinary Americans that our great and great-great grandparents suffered from prior to FDR and the rise of the progressive polices that were first implemented in the New deal era?
Monsanto and its goal to dominate the world’s agricultural production is just one example, if a particularly frightening one. Their past record on environment protection and as a major polluter of toxic waste around the globe is well documented here in the United States and around the world is well documented. Their ability to control media coverage in the United States regarding the potential health risks of their bio-genetically engineered products like bovine growth hormone (a product banned in most developed countries but not in America) is also quite telling.
Ultimately you and I, as consumers of the food US farmers produce, will pay the price for the failure to provide a a truly competitive market in seeds, for its development of untested and arguably unsafe bio-tech products, and for its goal of eliminating competition around the world for whatever products it produces.
But then, this isn’t much different than many other industries and corporations and their lobbyists who effectively (to quote Senator Dick Durbin “own the place.” He was referring to Bankers and the Senate, but his words could just as easily apply to any other company who is willing to buy politicians and even entire political parties in their quest to game the economy in their favor.
Adam Smith is famously quoted by conservatives for his economic magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations. They don’t tell you that Smith assumed a perfect market in which all participants had perfect information and which all dealt with one another fairly and honestly because if they did not their business would suffer as customers abandoned them for businesses that did.
What they forget to mention (or perhaps simply don’t knowq) is that Smith also wrote another famous treatise, one that pre-dated The Wealth of Nations: The Theory of Moral Sentiments, which provided the “ethical” and moral “underpinnings” for his later works. In The Theory of Moral Sentiments he stated:
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it. Of this kind is pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.
I don’t think Adam Smith ever imagined the world of multi-national corporations in which we live, and whose only value is profit no matter what the company has to do to achieve it, do you? Certainly he never imagined companies like Monsanto. If he had, he might have written a very different book rather than “The Wealth of Nations.”
I suspect the title would have been more along the lines of “The Wealth of Bastards Who don’t Give a Damn What they Do to You So Long as They Can Profit from It.” A title which in my mind, at least, more accurately reflects the economic world in which we, and Monsanto, currently live.
